The 5000-year view of rates and the economic consequences

Seeking Alpha/Lance Roberts

Repost from 10-14-2021

artist rendering of a man chasing a shooting star“BofA wants you to know that ‘Interest rates haven’t been this low in 5,000-years. ‘That’s right, 5000 years. ‘In the next 5,000 years, rates will rise, but no fear on Wall Street this happens anytime soon,’ said David Jones, director of global investment strategy at Bank of America. This should not come as a shock to anyone who has been watching, given that the Fed’s balance sheet is now an astonishing $8.5 trillion and that fiscal spending has caused the U.S. debt to balloon to over $28 trillion (For reference, the U.S. GDP is $22 trillion). All of this really means that the Fed and the U.S are in a tough spot. They need a lot of growth to dig out from mountains of debt, but they cannot afford for rates to move too high or debt service will become an issue. “

USAGOLD note: Some rather startling revelations in this article …… Roberts seems to believe that the Fed has no choice but to continue supporting the bond market. As a result, he is long bonds and will “continue to buy more whenever someone claims the ‘Great Bond Bull Market Is Dead.'” Is an aggressive, “all-in” approach a logical strategy, though, at a time when the real return on Treasuries is deeply in the negative? Already, we have considerable leakage of monetary inflation to price inflation which, in turn, is likely to push real yields even lower. So where does this all end and what will it mean for bond values along the way? Just askin’ ……

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